They’re the 1% no one aspires to join: the small percentage of taxpayers who get audited by the IRS. But those worried about suffering the tax equivalent of a root canal may be in luck this year, experts say. Thanks to budget cuts, the chances of getting audited will be even slimmer than normal.
IRS audit rates for individuals fell last year by 5.3%, according to an analysis by the Transactional Records Access Clearinghouse released this week. The trend may continue this year, experts say, because of the federal spending cuts known as sequestration that are expected to leave the agency with fewer employees on hand this summer to conduct audits and track down tax cheats, among other actions.
The agency has adapted to its slimmer workforce by moving away from face to face audits and using more correspondence audits, which are conducted over the mail, the TRAC report noted, leading the number of correspondence audits to nearly triple over the past two decades. Most cases of underreported income are now spotted through software the IRS uses to match the income reported on tax returns with the information it receives on 1099s and other income documents.